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Intellectuals these days seem almost inherently opposed to capitalism. And while we may view this negative perception as a relatively new phenomenon, the intellectual revolt against the free market is really nothing new.

In 1998, the brilliant philosopher and author Robert Nozick wrote an essay entitled, Why Do Intellectuals Oppose Capitalism? In his essay, he attempts to explain why it is that intellectuals, even right-leaning intellectuals, tend to resent the free market system. And the answer might surprise many, as his argument rests heavily on our education system.

The Wordsmiths

Before Nozick can dive in and properly explain why so many intellectuals stand in opposition to capitalism, he must first define what he means when he uses the term “intellectual.” Intellectuals and academics come in many different forms, but when Nozick speaks of them, he is referring to one particular group of people.

He writes:

“By intellectuals, I do not mean all people of intelligence or of a certain level of education, but those who, in their vocation, deal with ideas as expressed in words, shaping the word flow others receive. These wordsmiths include poets, novelists, literary critics, newspaper and magazine journalists, and many professors.”

He continues:

“The opposition of wordsmith intellectuals to capitalism is a fact of social significance. They shape our ideas and images of society; they state the policy alternatives bureaucracies consider. From treatises to slogans, they give us the sentences to express ourselves. Their opposition matters, especially in a society that depends increasingly upon the explicit formulation and dissemination of information.”

The wordsmiths, as Nozick calls them, are used to being held in high esteem in society. Since they hold the keys to communication and expression, they have been looked up to and revered by society and have become accustomed to recognizing and admiring their own importance. Of course, wordsmiths are not the only form of intellectual out there. They are, however, the group most commonly opposed to capitalism.

Nozick highlights how these intellectual “wordsmiths” are different than their “numbersmith” counterparts.

“Why do the numbersmiths not develop the same attitudes as these wordsmiths? I conjecture that these quantitatively bright children, although they get good grades on the relevant examinations, do not receive the same face-to-face attention and approval from the teachers as do the verbally bright children.”

When you are dealing with a field as black and white as math, you are either right or you are wrong. But when it comes to communication, the victor is not always the individual with the soundest logic. Instead, to he who can construct the most poetic sentences or appeal to the strongest emotions goes the spoils. And many wordsmiths are used to being praised for the construct of their words, rather than the content of their ideas.

Unfortunately, our education system has reinforced the belief that being a wordsmith guarantees your value in society. And unfortunately for the intellectuals, the market does operate in this manner. To succeed in the market you must create real value for people that goes beyond your intellect. And this is something that irks the academic class.

Nozick points out:

“Intellectuals now expect to be the most highly valued people in a society, those with the most prestige and power, those with the greatest rewards. Intellectuals feel entitled to this. But, by and large, a capitalist society does not honor its intellectuals.”

Schools, Intellectuals, and Central Planning

Many intellectuals foolishly believe that their intellect has bestowed upon them an inherent value and merit that all should recognize. And in a centrally planned society, this may be true. But in a capitalist system, this is not how we operate. As Nozick says, “The wider market society, however, taught a different lesson. There the greatest rewards did not go to the verbally brightest. There the intellectual skills were not most highly valued.”

Nozick writes:

“But a capitalist society does not satisfy the principle of distribution ‘to each according to his merit or value.’ Apart from the gifts, inheritances, and gambling winnings that occur in a free society, the market distributes to those who satisfy the perceived market-expressed demands of others, and how much it so distributes depends on how much is demanded and how great the alternative supply is.”

Meeting market demand has very little to do with intellect. You do not need a degree or years of schooling to be successful in the free market, and this on its own is enough to disenchant the wordsmiths. In the market, everyone has equal access to success so long as they are willing to work for it and have an idea or product that is wanted by others.

Unfortunately, our schooling system has not taught this principle well. In the classroom, the intellectual is praised and held up as a standard of excellence by the instructors. In this centrally planned environment, the intellectual thrives and builds on his or her feeling of intellectual superiority. But on the playground or in the halls, where, like the market, spontaneous order is everpresent, the wordsmith find himself out of place and unable to control their circumstances with their intellect.

As Nozick writes:

“For distribution in a centrally planned socialist society stands to distribution in a capitalist society as distribution by the teacher stands to distribution by the schoolyard and hallway.”

He continues:

“It is not surprising that those successful by the norms of a school system should resent a society, adhering to different norms, which does not grant them the same success.”

The market doesn’t care how smart you are. It doesn’t care where you went to school or how often you were praised by your teachers and professors. Instead, the market rewards individuals based on their ability to serve consumers and meet demand.

Nozick says:

“Despite the created expectation, a capitalist society rewards people only insofar as they serve the market-expressed desires of others; it rewards in accordance with economic contribution, not in accordance with personal value.”

He later continues:

“Capitalist societies reward individual accomplishment or announce they do, and so they leave the intellectual, who considers himself most accomplished, particularly bitter.”

In short, many intellectuals, both right and left, despise capitalism because it does not play by their arbitrary rules. An “A” on a test will get you praise from a teacher, but it will not put bread on your table or make you successful in the broader world. But since so many in the academic world have instilled in students this belief that they are superior to others, it is no surprise that many lose themselves in bitterness as they see those who are intellectually beneath them achieve higher levels of success.

Nozick hits the nail on the head when he writes:

“The intellectual wants the whole society to be a school writ large, to be like the environment where he did so well and was so well appreciated.”

Securing employment is one of the biggest issues facing returning citizens exiting the prison system today. But unfortunately, our broken justice system does little to prepare incarcerated individuals for the world that is waiting for them on the outside. And without a job, it becomes all too easy to fall back on the same old habits that landed someone behind bars, to begin with.

Luckily, where the government has failed the free market is stepping in to help provide second chances to those who need them most.

Enlightened Capitalism

According to the research firm Technomic, MOD Pizza is one of the fastest growing restaurant chains today. In about seven years, the company has expanded from five restaurants in the Washington area to 367 locations across 28 states and the United Kingdom. And already this year, the company has experienced a growth rate of 81%. But one of the secrets to MOD’s success may be surprising. Several years ago, it changed its hiring policy to include an often neglected portion of the U.S. population. And this decision has made all the difference.

Speaking of the business she co-founded with her husband Scott, Ally Svenson said:

“We have no interest in just building another fast-casual pizza business. We’re building a business platform to make positive social impacts.” And this is exactly what they have done. MOD has made it a routine practice to hire returning citizens who are leaving the penal system and are looking for work.

Years ago, the couple began paying attention to data that showed that former convicts were ideal employees. Anxious to stay out of prison and empowered by the ability to earn an income, formerly incarcerated employees are especially motivated. And since we still live in a world where many employers ask prospective workers to check a box if they have ever been convicted of a felony, a company’s willingness to hire returning citizens yields extremely loyal employees.

When Tony D’Aloia received his first paycheck from MOD he was overcome with emotion. His $800 check was more money than he had earned since before he went to prison for five years for conspiracy to distribute ecstasy. When he had first started at MOD in 2011, he was less than thrilled. He had been willing to accept a job as a dishwasher, but he wasn’t necessarily happy about it, though he was relieved to have a source of steady income.

Not only was the company unconcerned with his criminal record, but they were also willing to offer him benefits and a 401(K). And while dishwashing wasn’t the most glamorous of jobs, he was in no place to turn the job down. But after receiving that first check, he was filled with pride. Having endured working long hours in his holey, worn out shoes, D’Aloia took that first check and immediately bought himself a new pair, a moment he will never forget. “Life was better right then,” he said. “I could finally provide for myself.”

Within his first two years at MOD, D’Aloia was promoted three times. And his determination to succeed inspired the Svensons to refocus their company’s priorities. At first, they began hiring a few former convicts as a matter of convenience. There were a few individuals who had applied and the pair felt that it was the right thing to do. But after these “impact hires,” as they call them, began proving themselves to be motivated employees, the Svensons decided to adopt this policy as part of their business model.

Ally said, “After that first three-year period, the mission became very intentional. We started to describe our business as enlightened capitalism.”

“MODness”

In addition to hiring formerly incarcerated individuals, some of MOD’s franchises have also begun extending employment opportunities to those with Autism. Three years ago, in one of MOD’s Houston locations, a manager hired a young man with Autism to help fold boxes. Not only was the boy great at folding boxes, but he also enjoyed it. This resulted in the store hiring another employee with Autism, and then another. Now, there over 25 employees in the Houston store have Autism and are also thriving in their positions.

The company’s goal is now to spread “MODness,” what MOD insiders call happiness. In addition to its unique hiring practices, the company is also big on helping out its own. When an employee had his bike stolen, his co-workers pitched in to buy him another one. This act of “MODness” inspired the entire company to launch something called the Bridge Fund. The Bridge Fund is a private financial safety net within the company that employees can rely on in instances of emergencies.

When the company learned that one of its employees had been struggling with homelessness, it didn’t take long for it to get involved and make sure that they had secured him temporary housing. This act of kindness meant so much to the employee, he has remained a loyal worker in the years that have followed and now manages five of MOD’s locations.

While MOD Pizza hasn’t changed adopted these policies as a means of attracting consumers, it has definitely worked to this end. In fact, according to Entrepreneur Magazine, many consumers are willing to spend even more money on a product or service than they typically would if the company in question is cause-driven. This makes “enlightened capitalism” a win/win situation for all parties involved.

Not only are these returning citizens getting the rare opportunity to rebuild their lives, but the company itself is getting the opportunity to work with motivated, loyal employees. And the consumers win as well. By voting with their dollars, consumers can choose to spend their money on a company with a good cause. Capitalism might often get a bad name, but companies like MOD Pizza and many others are proving that when the free market gives back, almost everybody wins.

The issue of income and wealth inequality has gained public awareness recently, becoming an important economic problem in our time. Unfortunately, the quality of the public debate about this topic remains very poor. In this piece, I would like to point out three main shortcomings of the problem at hand.

Equality Itself Is Neither Good Nor Bad.

First, people do not differentiate between good and bad inequality. There is nothing inherently bad about inequality, since it’s, after all, only a formal characteristic of the relationship between certain values, like incomes of different people. What really matters is the reason of the inequality. Inequality that results from “rent seeking” and lobbying the government to implement beneficial regulations for the influential and already wealthy interest groups (you may think of banks “too big to fail”, farmers demanding subsidies or domestic industries supporting import tariffs) is obviously bad. Inequality caused by the quantitative easing programs, which increased prices of financial assets held by a relatively small number of wealthy individuals, is also not worthy of praise.

However, inequality resulting from economic progress does not deserve to be condemned, does it? During the Industrial Revolution, workers moved gradually from agriculture to manufacturing, which initially widened the inequality. But this is how the progress happens – it never occurs smoothly, as not all people take advantage of new market opportunities to increase their productivity at the same time. The current upswing in inequality also seems to be driven by technological progress, inter-sectoral reallocation of labour (from manufacturing to services), and globalization. The question whether we should oppose it equals to question whether we should be against progress itself. I hope it’s clear now that inequality may be either positive or negative, depending on its causes, and that the bad ones are not necessarily driven by the free-market capitalism, the favorite whipping boy for all the misery of the world. Instead, it’s crucial to understand that the rise in inequality observed recently in some western countries may result from many causes, including the global economic growth lifting people out of poverty all over the world.

In 20 Years, Almost Everyone Has Made Real Economic Progress.

This leads us to the second weakness of the public debate about the inequality: many people adopt too narrow, Western-oriented perspective. Just look at the chart below.

Chart 1: Change in real income from 1988 to 2008 among percentiles of global income distribution

As one can see, almost the entire bottom 75 percent has seen its real income rise between 1988 and 2008 – and some percentiles made really significant gains. Although it clearly shows that globalization benefited enormous number of people, intellectuals and the press are focusing on the working class in the West, whose real income relatively stagnated. It’s an unpleasant fact for these people, for sure. However, the funny thing is that they are between the 75th and the 90th percentile of the global income distribution, which mean that they belong to a global upper-middle class. From the global perspective, the current buzz about rising inequality is not a sign of concern about the poor at all – it is a worry about the income of an elite disturbed by the increased supply of low-skilled workers from developing countries. Surely, one can criticize the rise in inequality due to globalization – but it implies an assumption that the relative economic situation of the working class in developed countries is more important that the absolute increase in real incomes of Chinese or Indians. It turns out that the authors of Oxfam’s reports and other people who supposedly take care of human misery actually suffer from sinophobia.

Capitalism Has Almost Eliminated Extreme Poverty.

This is connected to the third cardinal sin of the contemporary debate about the income inequality, perhaps the most important one. People often confuse inequality with poverty, although these terms mean something different. The former occurs when people have different incomes, while the latter is when people do not receive enough money. Many people criticize the inequality, but what is really disturbing is not the fact that some have lower income than others, but rather that some have very little.

Fortunately, this is where capitalism enters the scene. Let’s see the chart below, which paints the spectacular reduction in global extreme poverty over the last few decades.

Chart 2: The percentage share of the world population living in extreme poverty, from 1820 to 2015.

As one can see, in 1820 almost all people in the world struggled for less than $1.90 per day. One hundred and fifty years later, still 60 percent of the global population lived in extreme poverty. Since then, the ratio declined to 9.6 percent. It means that billions of people have been taken out of extreme poverty. This progress is mind-blowing, especially for people who blame capitalism and ‘neoliberalism’ for the rise in inequality, although it is hardly surprising for economists who know that free markets enable economies to grow. Indeed, poverty was the default state of the humanity. What enabled for its reduction was simply to let poor people get richer by protecting property rights, liberalizing markets, and freeing trade.

This is how capitalism works: it generates wealth through free exchanges and accumulation of capital which increases the labour productivity. Therefore, the call for the greater economic equality for its own sake not only diverts us from the issue of poverty, which is the real problem, but it may be even counterproductive and hamper the economic growth — the only genuine means of eradicating poverty.

Arkadiusz Sieroń (sieron.arkadiusz@gmail.com) is assistant professor of economics at the Institute of Economic Sciences at the University of Wroclaw, Poland. This article was first published at mises.org on Oct 31, 2018.

Leftists love to complain about and blame capitalism for trapping individuals in poverty. But scream and whine as they may, the truth of the matter is free markets have done more to grow the middle class than any other factor throughout history.

A new study by the Brookings Institute found what many of us already know: capitalism makes everyone wealthier. And this is not exclusive to the “one percent.” In fact, the study found that under free market economies, both the rich and the poor get wealthier, which completely contradicts the rhetoric we are constantly hearing from the left.

Recently, progressives lost their minds when they discovered the net worth of Amazon CEO Jeff Bezos. Bezos, who as it turns out is worth an estimated $140 billion, then became the target of those trying to push the idea that extreme income inequality is keeping the poor poor and the rich rich. “No one personal should be allowed to have this much money” angry tweets read. Others lambasted Bezos for earning so much when some of his employees were earning so little.

But as the new Brookings Institute Study concludes, it is precisely this type of capitalism that results in job creation, which is helping to bring more formerly impoverished people into the middle class than ever before. And this is something to celebrate.

Income Inequality

Income inequality seems to be the hot-button issue of our times. Whether it is being used to justify higher minimum wages or to argue in favor of a universal basic income, the topic has become a favorite scapegoat for those who want the government to make everything “fair.” Of course, as is demonstrated by countries like Venezuela, when governments are in charge of making things fair, everybody loses.

Typically, capitalism is blamed for this gap between the very poor and the very rich. In fact, adjectives like “exploitative” and “greedy” usually come into play during these discussions, as those complaining call for the very rich to share more of their money with the very poor. But through capitalism, this is already basically happening but through voluntary means, not force.

Those who are very rich and choose to invest that wealth in commerce, they are creating opportunities for those in lower economic stations than themselves. With every new business venture is the opportunity for job creation. And with job creation comes a truly prosperous economy. But this is not just true in our own U.S. economy. As the new Brookings Institute study asserts, capitalism is helping to grow the global middle class as well.

Global Growth

According to the study’s author, Homi Kharas, the majority of the world’s estimated 7.5 billion population will be considered “middle-class” by 2020. Throughout the entire course of human history, there have never been so many people identifying as “middle-class” around the globe.

Kharas commented, “There was almost no middle class before the Industrial Revolution began in the 1830s. It was just royalty and peasants. Now we are about to have a majority middle-class world.” And just to be certain, according to the new study, “middle class” means someone who is able to afford all their basic necessities—clothing, food, shelter— while still having money left over to afford luxuries like technology or even higher education.

Currently, there are around 3.7 billion people in the world considered to be part of the middle-class. And that is up considerably from the past two years, as Kharas found. He said:

“There were about 3.2 billion people in the middle class at the end of 2016, 500 million more than I had previously estimated.This implies that in two to three years there might be a tipping point where a majority of the world’s population, for the first time ever, will live in middle-class or rich households.”

And this growing global middle-class is responsible for over $3.5 trillion in spending, which is around ⅓ of the total GDP for the entire world. But the most rapid growth is not happening in the wealthiest countries. In fact, it is the developing countries that where the middle-class has experienced runaway growth.

And this is largely due to capitalist influences. In recent decades, China has adopted more free market policies and the communist threat from the former Soviet Union is no longer what it used to be. Free markets have by and large been triumphant as extreme poverty is actually decreasing across the globe as a direct result of capitalism spreading.

In fact, between the years of 1976 and 1998, the number of people living in poverty dropped by 235 million people. There is almost no way to look at this data and not be excited by what it means for human civilization.

The doom and gloom being shoved in our faces does not reflect the reality of our present day. There will always be grievances to air, but capitalism is not among them. In fact, most of the problems that we associate with income inequality would be lessened if our market were less regulated than it is today.

Capitalism allows everyone to rise above the status they were born into and it is being felt around the entire globe.

In our postmodern turf war over linguistic territory, everything is fair game. For example, the meaning of words like liberal, freedom, justice, and value have been redefined by the dominant thought leaders in academia and media. Now Wall Street is getting in on the act with the word capitalism itself.

For the purpose here, capitalism is a socio-economic system of voluntary production and trade. It is conducted by free people, each trading value for value, with their own capital and ingenuity. It requires a rational code of morality, one in which all participants respect each other’s freedom to act on their judgment. Government involvement is limited to the enforcement of contracts and the protection of person and property. In other words liberal, freedom, justice, and value.

Even 18th century classical economists, as opposed in their ideology as David Ricardo and Karl Marx, agree on the basic analytical framework of capitalism and its wealth creating power. It is their opinions on capitalism’s outcomes for society as a whole where they diverge. Three hundred years later that has not changed, yet the turf war over the meaning of words continues to evolve.

The Sanctimony of the Witless

Because of Marx’s influence over 20th century political elites, capitalism and profits are still considered destructive human tendencies. And because of that, any political or corporate leaders who replace those words with social responsibility are awarded gold stars. To a classical capitalist, their social responsibility is fulfilled with every transaction. To a corporatist, social responsibility can mean anything that is politically expedient. And now that the US economy is setting records again, Wall Street is realizing that maybe capitalism is OK to talk about. After all, nothing else has ever created so much peace and prosperity, it just needs some polish – a new marketing campaign!

Enter JUST Capital, and their new manufacturing and distribution partner, Goldman Sachs. In June, this duo launched their first exchanged traded fund (a portfolio of stocks) on the New York Stock Exchange – the JUST US Large Cap Equity ETF (Ticker: JUST). According to JUST Capital CEO Martin Whitaker, “We are big believers in capitalism as a force for good. The goal is to have capital flow in a just direction.” He goes on to declare his ultimate prize as “We are modernizing the definition of capitalism.”

But who gets to decide what a just direction will look like? According to their website, “JUST Capital was co-founded in 2013 by a group of concerned people from the world of business, finance, and civil society – including Paul Tudor Jones II, Deepak Chopra, Rinaldo Brutoco, Arianna Huffington, Paul Scialla, and others.” You know, the usual muckety-mucks. And their hubris is astounding, not only is the term civil society redundant and meaningless, like social justice, they get to decide who its constituents are.

Clear, Crowdsourced, Commonsense Capitalism

To summarize, postmodern capitalism will correct the pernicious flow of capital to nefarious activities as directed by charlatans hand picked from anarchist mobs. OK, that sounds ridiculous, they have a better plan – drum roll please. The just flow of capital will be determined by “the true priorities of the American people.” Phew!

In order to get an accurate picture of what 320 million Americans think about complex systems, a foolproof methodology will be employed, the one that predicted the outcome of the 2016 US presidential election – professional pollsters. “To date, we have surveyed over 72,000 people from all around the country to identify the top issues when it comes to just business behavior. The results represent a clear, crowdsourced, and commonsense blueprint for the kind of marketplace people in the U.S. actually want.” What could go wrong with that – a poll of 72,000 people who know nothing about economic systems and have a baked-in aversion to capitalism? But seriously, this proposition is that a contrived poll will allocate capital more efficiently than 320 million people making purchases, or investing money, trading value for value, with the producers that actually create markets.

According to JUST Capital, it just so happens that the true priorities of the American people are aligned with the ESG reporting requirements of the greenwashing police. All of the metrics have an environmental, social, or governance component. “Through extensive quantitative polling, we then derive weights for the Drivers and Components, which correspond to their relative importance in the public’s opinion.”

The use of the term ‘quantitative’ is not random, its insidious. In capital markets, quantitative research requires unassailable data sets. To hijack the term at a time when it is gaining unprecedented acceptance as an investment management discipline is shameless.

Innovative Companies are Choosing Innovative Capitalists

In order to rationalize their behavior, JUST Capital claims to be restoring the confidence in capital markets that was lost ten years ago in the wake of the (government induced) mortgage banking collapse. The good news is, ESG reporting activism may be dead on arrival. According to Bloomberg Businessweek:

Companies are staying away from public markets in droves. From an annual rate of almost 700 new listings in the last half of the 1990s, the average has fallen 75 percent. The number of so-called activist investors making demands on public companies swelled past 500 for the first time in the first half of 2018. What we are really witnessing is an eclipse of public markets as the place where young successful American companies seek their funding.

The message is clear, innovators and wealth creators now have access to non-traditional sources of capital, the flow of which is directed by individuals trading value for value with their own capital and ingenuity. And it brings home another very important lesson, one ignored by central planners, regulators, and predatory reformers; innovation and capital will always move more nimbly and productively than the myopic and clumsy looters.

I do not remember a great deal of the lessons I learned in elementary school. For one thing, I attended a public school, meaning I did not receive top of the line education. Made to sit restlessly in desks for eight hours a day, recess seemed to be most students’ favorite subject of the day.

But for the sixth graders who attended my elementary school, springtime meant that we got to begin a unit on entrepreneurship, one of the few subjects that made us excited about learning. To get each of us excited about the project, we spent an entire week learning about the founding of Ben and Jerry’s Ice Cream. And while cold sugary desserts were quite appealing to us as the spring weather grew warmer, it was the prospect of earning money that excited most of my fellow classmates.

A Lesson in Entrepreneurship

At the end of the unit, our sixth-grade class would be broken up into groups where we would be responsible for creating some sort of business. Our target audience would be our fellow classmates and each group would have to create a marketing campaign as well as actually creating and selling whatever product we had selected.

Since our unit on entrepreneurship had been dessert-centered, most of the groups went for edible products. Some even paid for pizza to be delivered during lunch and then charged more per slice in order to turn a profit. My group decided to make custom ice cream shakes. Buying huge tubs of vanilla ice cream and a wide selection of candy bars, the “Sweet Shop,” as it was called specialized in blending your candy bar of choice with vanilla ice cream.

The idea was a success! In fact, we had the entire sixth-grade class lined up for our custom shakes. As a ten-year-old who never had to do much aside from taking out the trash every now and then, this was my first experience with manual labor. I wanted people to like the product my team was selling, so I worked diligently to make sure the ratios of ice cream to candy was perfect.

All this hard work paid off, as we sold out of our supply in less than an hour. After all was said and done, we had earned $160, not shabby for a bunch of twelve-year-olds in the 1990s.

After the week of student-run businesses had come to a close, each group was told that they were to turn over our funds to our teachers, who would then give us our earnings. Weeks went by, and none of my classmates had heard anything further from our teachers about the money we had earned. This was especially frustrating, as each of us was responsible for putting up the capital for our own projects, which meant lots of allowance being spent on a school project.

A Lesson in Regulation

Finally, almost a month later our principal gathered the sixth grade together in the auditorium for an announcement. “I know many of you are wondering what happened to the money you earned,” she began. “The administration has decided that it would be irresponsible of us to hand over so much to young students. So after much thought and deliberation, we have decided that we are going to keep the money and put it towards a field trip for the entire class.”

You could hear a pin drop in the room after that announcement. We had all worked so hard and now we were being told that we would not be receiving the money we earned. While this was a great primer for dealing with IRS in our adult lives, what our teachers and administrators were really teaching us was that there was something inherently “bad” about earning money.

It is this same attitude that follows students throughout their entire education. Instead of being told how wealth created by entrepreneurs has fueled innovation and created countless jobs, we are taught that seeking money is somehow something to be ashamed of. As children, we understood this to be false. We understood that raising capital and putting in the work needed to get a business idea off the ground was grueling. But the money we earned, as a result, was the light at the end of the tunnel. One that was now being extinguished by the educators that were supposed to be teaching us the value of entrepreneurship.

That experience has always stuck with me. During my own experience as a teacher, I made sure that I would never be this kind of educator. When I saw my students trying to earn an extra buck by selling drawings to fellow classmates or making bracelets and selling them to friends, I always gave them an approving smile.

If we want to teach our children to be self-sufficient adults, we must teach them the beauty of entrepreneurship. Wealth creation is what makes the world go round. We should be teaching our children the beauty of earning money, not demonizing it.

Private corporations have become the punching bags of many, who are under the belief that socialism is needed to create a charitable society. In their minds, without government, human beings are not likely to give back. But by casting capitalists as the villain in every story, these critics neglect, or purposefully ignore, the many instances when private companies have given back to their communities. In fact, when national disasters strike, for example, it is often private organizations that arrive first on the scene.

Wild Fires

Of all the “greedy” capitalist entities, there is perhaps no one judged more harshly than oil companies. Yet, when a large forest fire consumed more than one million acres of land in the province of Alberta, Canada, the oil companies, along with other private entities, pulled together to lend a hand.

As it continued to burn for the better part of a month, the fire caused more than 60,000 residents to flee their homes. Many homes were destroyed and the city of Fort McMurray was left in ruins.

Commenting on the fire, Tristin Hopper of the National Post highlights specific relief efforts sponsored by local oil companies in Alberta. Hopper mentions how local oil companies provided free food and shelter to over 25,000 community members affected by the fires. Likewise, as the fires continued to spread and began cutting off easy access to the roads, Brion Energy arranged to have perishable foods delivered each day via truck shipments.

But the acts of charity were not limited to these oil companies alone. Shell Albian Aerodrome actually helped many residents escape the scene by providing buses for their evacuation. Suncor’s Firebag Aerodrome, also helped with the evacuation efforts by using its own company-chartered commercial jets to help over 7,000 residents escape the fire. But this is far from the only instance of private entities giving back.

“That shouldn’t surprise anyone who knows what Walmart did after Hurricane Katrina hit the Gulf Coast in 2005. The company shipped thousands of trucks of water and other supplies into the area, well ahead of the lethargic Federal Emergency Management Agency. It even beat the Red Cross in many areas.”

In addition to the Walmart’s charitable acts, McDonald’s also handed out free food to first responders and Marriott offered up free rooms for those who had been displaced.

Though these private corporations are so often thought to be cold, unsympathetic, and disconnected from the experience of the typical American, they are, in fact, still members of their respective communities who rely on the patronage of the locals.

In return, these private entities are there to meet the needs of the consumer, which, under these circumstances, has meant giving the community what it needed most, acts of charity. In addition to serving their communities when it is most needed, the private sector offers something that the government has never been able to master; efficiency.

Driving this point home, Horwitz writes:

“These firms have experience that makes them distinctly effective during and after disasters. Walmart constantly responds to changing market conditions, moving people and resources where they are needed. FEMA and other agencies don’t regularly engage in this sort of behavior.”

Before casting stones at private corporations based solely on their desire to make a profit, it would be wise to first look at what these companies have done for their surrounding communities. Additionally, before praising the government for simply creating agencies meant to aid those in need, it would be wise to take a close look at how these agencies are run and ask ourselves if what is being done by government cannot be performed more adequately by the free market.

“Liberal” and “capitalism” are not terms typically associated with each other today. This is largely because “liberal” is now so widely associated with progressivism, an ideology that espouses anti-capitalist beliefs.

Progressives falsely get the credit as being the philanthropists of the political world. And to many, capitalism appears to be the antithesis of humanitarianism, crushing the people and subjecting them to the whims of the wealthy and entrepreneur class. But in reality, capitalism is the ideology for all. And it has been one of the only real tools against global poverty and stagnation.

What Is Capitalism?

In the introduction of his book Liberalism, Mises refers to capitalism as follows:

“A society in which liberal principles are put into effect is usually called a capitalist society, and the condition of that society, capitalism.”

As discussed previously, Mises explains that true and classical liberalism encompasses free markets, cosmopolitanism, and limited government intervention. But above all things, capitalism has made the world a better place by allowing innovation of all kinds to improve the lives of individual beings.

Because of capitalism, countless jobs have been created that have helped improve the lives of many. Thanks to the scientific improvements that have come as a result of free market capitalism, people are living longer. Diseases that once wreaked havoc are now eradicated. Likewise, technological advances have made the world a more convenient place to live while also allowing larger quantities of products to be made at lower costs and at quicker speeds.

Capitalism has allowed wealth to be created while also creating abundant value in the lives of all those who reap the benefits of innovation: which is every single actor involved in the market process, both consumer and creator.

Mises reflects on this phenomenon by saying:

“However, it requires only a moment’s reflection to realize that the fruits of all technological and industrial innovations make for an improvement in the satisfaction of the wants of the great masses.”

But it isn’t only those who subscribe to Austrian economics who understand how free market capitalism enriches the lives all those it impacts.

The band U2’s frontman Bono has never been shy about flaunting his philanthropic work in developing nations. In his political life, he has been a huge advocate for progressive policies. However, in 2013 he admitted that during the course of his work he learned that it was not foreign aid that helped lift individuals out of poverty.

When reflecting on his work in Africa, Bono said:

“Aid is just a stopgap. Commerce [and] entrepreneurial capitalism take more people out of poverty than aid. We need Africa to become an economic powerhouse.”

Unfortunately, there are still many who, for one reason or another, refuse to see the situation clearly. Instead of associating capitalism with flourishing nations, they equate it only with suffering and wealth inequality.

As Mises says:

“Nevertheless, as a result of the zealous propaganda of the anti-liberal parties, which twists the facts the other way round, people today have come to associate the ideas of liberalism and capitalism with the image of a world plunged into ever increasing misery and poverty.”

Liberalism Is for Everyone

One of the most commonly heard arguments against liberalism and capitalism is that it favors only a select few. But nothing could be further from the truth. As Mises is sure to point out:

“Liberalism is not a policy in the interest of any particular group, but a policy in the interest of all mankind. It is, therefore, incorrect to assert that the entrepreneurs and capitalists have any special interest in supporting liberalism.”

Also lost on many is the fact that each person is directly benefiting from the entrepreneur and the capitalist they condemn. No matter how much you pretend to hate consumerism almost everyone, save the extreme minimalist, has experienced brand loyalty to some extent. And with each innovation put forth by an entrepreneur willing to take risks, the consumer benefits. At the end of the day, everybody wins.

Mises writes:

“It hardly occurs to anyone, when he forms his notion of a capitalist, that a social order organized on genuinely liberal principles is so constituted as to leave the entrepreneurs and the capitalists only one way to wealth, viz., by better providing their fellow men with what they themselves think they need.”

Giving one specific example of how individuals have benefitted from markets, Mises reminds the reader that without them, consumers would not have near limitless access to sugar.

“No reference is made to the fact that capitalism has placed a delectable luxury as well as a food, in the form of sugar, at the disposal of the great masses.”

But still, even though these types of examples are provided with frequency, many tend to blame capitalism for all the ills and inequalities of the world.

“The links in the chain of reasoning by which antiliberal demagogy succeeds in laying upon liberalism and capitalism the blame for all the excesses and evil consequences of antiliberal policies are as follows: One starts from the assumption that liberal principles aim at promoting the interests of the capitalists and entrepreneurs at the expense of the interests of the rest of the population and that liberalism is a policy that favors the rich over the poor.”

We have already seen that this is entirely untrue. Not only do consumers benefit from new products, but with each new market innovation comes the need for new jobs. The concept of the invisible hand directly touches on this matter. Even if the entrepreneur did not intend to do a great service to his community, he does so by creating consumer value, as well as jobs, in pursuit of profit.

Therefore, these liberal policies that allow more entrepreneurial creation with fewer government restrictions do not just benefit the entrepreneurs and the wealthy. Each individual who profits, either through employment or consumer satisfaction, is a beneficiary of capitalism.

Another problem with how capitalism is perceived by others is that many who sometimes claim to be advocates for the system, or lack thereof, are anything but.

“Then one observes that many entrepreneurs and capitalists, under certain conditions, advocate protective tariffs, and still others—the armaments manufacturers—support a policy of “national preparedness”; and, out of hand, one jumps to the conclusion that these must be “capitalistic” policies.”

But Mises explains:

“If many entrepreneurs today advocate protective tariffs, this is nothing more than the form that antiliberalism takes in their case.”

But even though there is so much evidence to the contrary, there are still anti-liberals who have made it their life’s mission to fight free market capitalism at every corner. But for this, the great Mises also has an explanation, one that will be explained in the next installment.

We’ve quoted Andy Kessler before as a reliable, common sense defender of capitalism and free markets. Here he is again with a eyes-wide-open point of view about so-called socially responsible investing. The most socially responsible contribution of a company is to make a profit.

Wall Street considers it a truism that money sloshes around the globe seeking the highest return. But there are countless investors, believe it or not, who are willing to accept lower returns. P.T. Barnum supposedly said there’s a sucker born every minute. Many of them go into so-called socially responsible investing. Laurence Fink of BlackRock, which manages $6 trillion in assets, is only the latest to evangelize this fad. But the basic idea is to throw money away. In reality there is no trade-off of Vice vs. Nice. There are only returns.

“Corporate social responsibility” fails under the same halo. Reread Milton Friedman’s 1970 article “The Social Responsibility of Business Is to Increase Its Profits.” For stockholders to push their view of social responsibility, Friedman wrote, is simply to force others “to contribute against their will to ‘social’ causes favored by the activists.”

Profits are the best measure of a business’s value to consumers—and to society. No one holds a gun to the customer’s head. If the buyer weren’t glad to pay the free-market price, he would make the product or perform the service himself. Yet this idea is questioned all the time.

A case in point is Amazon, currently worth $625 billion based on expectations for Amazon-size profits to come. A Seattle Times headline in 2012 lamented that the company was “a virtual no-show in hometown philanthropy.” Sally Jewell of the retailer REI told the newspaper: “I’m not aware of what Amazon does in the community.” Really? Besides offer low prices, huge variety and quick delivery, along with jobs not only in Seattle but around the world, as manufacturers leverage Amazon’s platform to reach global customers? But the company didn’t sponsor concerts in the park! Gimme a break.

A counterexample is Etsy, which for years proudly touted that it was a “B Corp,” one “certified by the nonprofit B Lab to meet rigorous standards of social and environmental performance.” Sounds a bit wishy-washy, but maybe it was supposed to attract social-impact investors. How’s it going? After Etsy went public in 2015, it opened at $31 a share, bottomed out in 2016 around $7, and now trades at $19. That’s worse than dead money, given that the overall market is up a third since Etsy’s IPO. Little surprise, Etsy is no longer interested in being a B Corp.

In 2016 the Rockefeller Family Fund decided to “divest from fossil fuels.” Whether or not that improved the family’s social standing in New York, it couldn’t have been good for the bottom line: Brent crude was $40 a barrel then, and it’s now pushing $70.

California’s $350 billion state pension system, Calpers, has its own set of confusing divestment initiatives. Last month the American Council for Capital Formation warnedthat Calpers “has demonstrated a troubling pattern of investments in social and political causes that are truly jeopardizing the retirement fund.” Of the system’s nine worst-performing funds, the report says that four focused on renewable energy.

Individual investors can put their own money into hundreds of “sustainable,” “responsible” and “impact” funds, with names like Domini Social Equity and the Neuberger Berman Socially Responsive. Returns are all over the place. But of about 175 that had full-year returns in 2017, 75% underperformed the market. That’s a steep price to pay.

Don’t be fooled by the word “sustainable.” Al Gore and Goldman Sachs alum David Blood set up Generation Investment Management to pair sustainability research with traditional investing rigor. A few leaks of Generation’s returns have shown pretty good numbers. But it depends on what the meaning of “sustainable” is.

Think of Google, which made Al Gore a fortune thanks to his pre-public stock options. Google seems to be sustainable in the business sense, but in the climate-change sense? The company has data centers all over the place that use gobs of electricity. Perhaps Blood and Gore—I know, that would have been a much better company name—are simply deniers, since reports from the Securities and Exchange Commission show that their fund owns not just Google but also electricity hogs Facebook and Amazon.

Master investor Charlie Munger summed it up last year: “Gore hired a staff to find people who didn’t put CO2 in the air, and of course that put him into services. Microsoft, and all these service companies were just ideally located, and this value investor picked the best service companies, so all of a sudden the clients are making hundreds of millions of dollars . . . and he’s an idiot.”

The bottom line is this: Do whatever you want with your money. Feel virtuous. But if you think you’re being charitable for “responsible” investing, you are, but not in the way you think. If you don’t put your money where the returns are, someone else will. By passing up gains, you’re just making guys like George Soros and Steven Cohen richer so they can buy more bad art. Let the money slosh.

Appeared in the January 22, 2018, print edition of The Wall Street Journal.

Our family made a brief trip to New York City for a completely capitalist Christmas visit. Here are a few things we learned.

The area around the Rockefeller Center Christmas Tree is packed with visitors, as are the streets leading up to the Tree, including Fifth and Sixth Avenues nearby. In previous years, we’ve observed spontaneous order emerge in the crowds. People move slowly and politely and there’s no overwhelming crush. This year, the NYPD had erected barricades, parked their imposing vehicles across walking lanes, and were marching around with their weaponry and shouting through bullhorns. The result was chaos and stress.

Lesson 1: Government intervention and the use of coercive force leads to worse results than an unhampered market in every case.

We shopped Fifth Avenue and received excellent service from the personnel in the retail stores, even though they were crowded and heavily shopped. There was one exception: the storefront for a famous brand where my wife received terrible treatment when asking for an exchange of a damaged item she had purchased at that store. She will no longer shop there – competition provides plenty of alternatives – and the famous brand loses the lifetime value of her future purchase stream.

Lesson 2: The consumer is still boss, and customer service is a critical, 365 X 24 promise that can never be broken.

We shopped Madison Avenue on a Sunday, with a different experience than Fifth Avenue: calmer, quieter, less rushed. We found one European fashion store closed in the French manner. It felt like they were missing a commercial opportunity, and making a sacrifice to some other priority.

Lesson 3: Americans are more committed to capitalism than other nations, which will help us in the long run.

Some of our shopping was from a prepared list of gifts, and some was spontaneous. It was instructive and pleasing to find a few occasions when an idea springing from the individual subjective creativity of a clothes designer resonated with the subjective preferences and tastes of my wife in shopping mode. The designer and the shopper become coupled oscillators, and a mutually beneficial exchange takes place, advancing and enriching the capitalist system.

Lesson 4: Spontaneous Order is all around us.

We went to a supper club, where there was a crooner with a band, offering Christmas songs and what the crooning industry calls “classics”: old songs the crooner knows well and with which the audience is familiar. There were two seatings for supper and two shows. The entire evening was meticulously orchestrated, both in the restaurant and on the bandstand. The audience – people of all ages and from all over the country and the world – enjoyed the whole thing immensely and they’ll talk about it for along time with their friends.

Lesson 5: There is a market for traditional entertainment, if you can identify the right recipe. It has ongoing and lasting appeal, even in the world of streaming and digital hip-hop.

We attended a play on Broadway, written by a Netflix-known screenwriter, with a famous Hollywood star in the leading role. The theater, like most on Broadway, was old and decrepit, and lacking in modern entertainment amenities. Nevertheless, it was full, and the experience on offer was exactly as advertised, neither more nor less.

Lesson 6: High quality branded content sells well, even when the packaging is inferior.

We moved around town via walking and Uber. It all worked extremely smoothly. We incurred some “surge pricing” on Uber, which we were happy to pay, and suggested to our driver that the term be changed to “happy for the privilege pricing” or something more mellifluous. All of our Uber drivers were courteous and expert, and the cars clean and comfortable.

Lesson 7: Private transportation options are the best, because consumers determine both price and value.

We exited via Newark Airport, Terminal C. The TSA experience there is horrendous. We had not been yelled at so much, so loudly and so threateningly since second grade. In addition to the constant yelling by TSA employees, we were shoved, constrained, forcibly re-directed and groped, as well as delayed. The people yelling at us were Americans, too, and they’ll probably buy nice gifts for their family and be perfectly nice at the festive table.

Lesson 8: See Lesson 1. And note that people who accept government employment risk being converted into coercive state robots, even at Christmastime.

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